Saturday, May 27, 2023

Alex Mashinsky, co-founder and former CEO of bankrupt crypto lending platform Celsius Network, has filed a response to New York Attorney General Letitia James’ suit against him. According to the document, the suit has shortcomings in presenting the facts in the case and its legal argument and should be dismissed.

James claimed in her suit on behalf of the people of New York state that Mashinsky defrauded over 26,000 New York residents out of billions of dollars, particularly by making false statements about the company’s financial situation.

Mashinsky’s response alleges the suit “parrots misinformation,” shows a lack of understanding of Celsius’ business, and cherry-picks statements from Mashinsky’s 180 weekly YouTube appearances. In addition, the suit allegedly did not consider circumstances beyond Mashinsky’s control, that is, the crypto market downturn.

The response also faulted the suit’s application of the Martin Act, New York’s strict “blue sky” securities law, and other statutes cited in its seven counts. The response stated:

“Because the Complaint fails to state a legally-cognizable claim against Mashinsky and is otherwise deficient, it should be dismissed in its entirety.”

James’ suit against Mashinsky was announced Jan. 5 and amended in March. Notably, at least for Mashinsky’s response, the suit does not name Celsius as a defendant, only Mashinsky.

Celsius declared bankruptcy on July  13, 2022, after pausing withdrawals a month prior. Depositors still have not received their money back, although Celsius settled with decentralized finance market makers Compound, Aave, and Maker on the eve of its bankruptcy filing.

Related: Celsius creditors committee proposes suing Mashinsky, other Celsius execs

A court-appointed independent examiner found many issues with the company’s behavior in a report issued in January. Examiner Shopa Pillay said the company paid $1.36 billion more in rewards than it generated in revenue from customer assets between 2018 and June 30, 2022.

An auction of Celsius assets is scheduled for May 3, after a number of delays. Bidders reportedly include Gemini and Coinbase.

Magazine: All rise for the robot judge: AI and blockchain could transform the courtroom